Bulgaria has substantial green growth potential, but it depends upon bold and systematic actions in areas like agriculture, energy efficiency, and green manufacturing, says Markus Repnik, World Bank Country Manager for Bulgaria.Read More »

A new report, "Growing Green: The Economic Benefits of Climate Action" outlines policies and recommendations to help guide countries in the Europe and Central Asia region towards a new growth model.Read More »

The European Union Emissions Trading
Scheme is the first international cap-and-trade program for
carbon dioxide and the largest carbon pricing regime in the
world. A... Show More + significant concern over the Emissions Trading
Scheme has been the potential impact on the competitiveness
of industry. Using data on 5,873 firms in ten European
countries during 2001-2009, this paper assesses the impact
on three variables through which the effects on firm
competitiveness may manifest -- unit material costs,
employment and revenue. The analysis focuses on the three
most heavily-emitting industries under the program -- power,
cement, and iron and steel. Empirical results indicate that
the Emissions Trading Scheme has had different impacts
across these three sectors. Although no impacts are found on
any of the three variables in the cement and iron and steel
industries, a positive effect is found on both material
costs and revenue in the power sector. The effect on
material costs likely reflects fuel-switching to reduce
carbon dioxide emissions, while that on revenue may be
partly due to cost pass-through to consumers in a market
that is less exposed to competition outside the Europen
Union. Overall the findings do not substantiate concerns
over carbon leakage, job loss or industry competitiveness
during the study period. Show Less -

This paper analyzes the differential
impact of climate change policies on employment in Eastern
Europe and Central Asia. In particular, the paper examines
(i) how vulnerable... Show More + labor markets are in Eastern European and
Central Asian countries to future carbon regulation, and
(ii) what countries can do to mitigate some of the potential
negative effects of these regulatory changes on employment.
In many aspects, the nature of the shock associated with
climate regulation is similar to that associated with an
increase in energy prices. Constraints on carbon emissions
put a price on climate-damaging activities and make
hydrocarbon-based energy production and consumption more
expensive. As a result, firms in energy-intensive industries
may react to higher energy prices by reducing production,
which in turn would lead to lower employment. In the
presence of frictions in labor markets, these sector shifts
will cause resources to be unemployed, at least in the short
term. Using principal component analysis, the paper finds
that Eastern European and Central Asian countries vary
greatly in their vulnerability and adaptability of
employment to carbon regulation. Since the economy takes
time to adjust, policy-makers will need to ensure that the
incentives are there for new firms to emerge and employ
workers, and that workers have the skills to respond to that
demand. Moreover, governments have a role to play in
ensuring that workers that are displaced have a proper
safety net that will not only help in protecting their
welfare, but will also allow workers to make more efficient
labor market transitions. Show Less -

Greenhouse gas emissions are largely
determined by how energy is created and used, and policies
designed to encourage mitigation efforts reflect this
reality. However,... Show More + an unintended consequence of an
energy-focused strategy is that the set of policy
instruments needed to tap mitigation opportunities in
agriculture is incomplete. In particular, market-linked
incentives to achieve mitigation targets are disconnected
from efforts to better manage carbon sequestered in
agricultural land. This is especially important for many
countries in Eastern Europe and Central Asia where
once-productive land has been degraded through poor
agricultural practices. Often good agricultural policies and
prudent natural resource management can compensate for
missing links to mitigation incentives, but only partially.
At the same time, two international project-based programs,
Joint Implementation and the Clean Development Mechanism,
have been used to finance other types of agricultural
mitigation efforts worldwide. Even so, a review of projects
suggests that few countries in Eastern Europe and Central
Asia take full advantage of these financing paths. This
paper discusses mitigation opportunities in the region, the
reach of current mitigation incentives, and missed
mitigation opportunities in agriculture. The paper concludes
with a discussion of alternative policies designed to
jointly promote mitigation and co-benefits for agriculture
and the environment. Show Less -

Albania is among the most vulnerable
countries to external energy shocks and climatic conditions,
because of its high dependency on hydropower for
electricity. Given... Show More + highly volatile international energy
prices and expected global warming, it is becoming
increasingly important to manage the demand for electricity.
However, the country has long been faced with a significant
problem of electricity metering. About one-third of total
energy is lost for technical and nontechnical reasons. This
paper estimates the residential demand function by applying
a two-stage system equation method for an endogenous
censored variable, because the lack of metering makes the
electricity consumption partially observable for the
econometrician. It is found that metering is important to
curb non-essential electricity use by households. The
electricity demand could also be reduced by raising the
first block rate and lowering the second block rate and the
threshold between the two blocks. In addition, weather
conditions and home appliance ownership would affect the
demand for electricity. But the latter looks more
influential than the former. Show Less -

How should Tajikistan adapt to ongoing
and future climate change, in particular given the many
pressing development challenges it currently faces? The
paper argues that... Show More + for developing countries like Tajikistan,
faster economic and social development is the best possible
defense against climate change. It presents some key
findings from a recent nationally representative household
survey to illustrate the strong public support for more
climate change related spending on better management of
water resources, disaster management, agriculture, and
public health--four key sectors that the government's
latest poverty reduction strategy identifies as being
especially important from a climate change perspective.
Finally, the paper argues that, as important as
project-based adaptation measures may be, it is imperative
that they be supported by an overall policy framework that
provides a truly enabling environment to facilitate faster
climate change adaptation. Show Less -

Many cities across Europe and Central
Asia are experiencing the impacts of climate change, but
most have not integrated climate adaptation into their
agendas. This paper... Show More + examines the threats faced and measures
that can be taken by cities in the region to protect
buildings, heritage sites, municipal functions, and
vulnerable urban populations. In general, local governments
must be proactive in ensuring that existing buildings are
climate ready, paying particular attention to emerging
technologies for retrofitting the prefabricated, panel style
buildings that dominate the landscape while assessing the
viability of homes situated in flood plains, coastal areas,
and steep slopes. They also must ensure that new
developments and buildings are designed in ways that account
for climatic fluctuations. Although the resilience of all
populations needs to be considered, historical patterns of
discrimination require that special provisions are made for
the poor and for ethnic minorities such as the Roma because
these groups will be most at risk, but are least likely to
have access to adequate resources. Urban climate adaptation
requires national-level support and local commitment.
However, centralized planning and expert-led decision-making
under the former regimes may affect the ability of cities to
pursue programmatic approaches to adaptation. Therefore,
while national governments need to make adaptation a policy
priority and ensure that municipalities have adequate
resources, local government agencies and departments must be
transparent in their actions and introduce participatory and
community-based measures that demonstrate respect for
diverse stakeholders and perspectives. Show Less -

The use of carbon-intense fuels by the
power sector contributes significantly to the greenhouse gas
emissions of most countries. For this reason, the sector is
often... Show More + key to initial efforts to regulate emissions. But how
long does it take before new regulatory incentives result in
a switch to less carbon intense fuels? This study examines
fuel switching in electricity production following the
introduction of the European Unions Emissions Trading
System, a cap-and-trade regulatory framework for greenhouse
gas emissions. The empirical analysis examines the demand
for carbon permits, carbon based fuels, and carbon-free
energy for 12 European countries using monthly data on fuel
use, prices, and electricity generation. A short-run
restricted cost function is estimated in which carbon
permits, high-carbon fuels, and low-carbon fuels are
variable inputs, conditional on quasi-fixed carbon-free
energy production from nuclear, hydro, and renewable energy
capacity. The results indicate that prices for permits and
fuels affect the composition of inputs in a statistically
significant way. Even so, the analysis suggests that the
industrys fuel-switching capabilities are limited in the
short run as is the scope for introducing new technologies.
This is because of the dominant role that past irreversible
investments play in determining power-generating capacity.
Moreover, the results suggest that, because the capacity for
fuel substitution is limited, the impact of carbon emission
limits on electricity prices can be significant if fuel
prices increase together with carbon permit prices. The
estimates suggest that for every 10 percent rise in carbon
and fuel prices, the marginal cost of electric power
generation increases by 8 percent in the short run. The
European experience points to the importance of starting
early down a low-carbon path and of policies that introduce
flexibility in how emission reductions are achieved. Show Less -

Agricultural production is heavily
dependent on water availability in Turkey, where half the
crop production relies on irrigation. Irrigated agriculture
consumes about... Show More + 75 percent of total water used, which is
about 30 percent of renewable water availability. This study
analyzes the likely effects of increased competition for
water resources and changes in the Turkish economy. The
analysis uses an economy-wide Walrasian Computable General
Equilibrium model with a detailed account of the
agricultural sector. The study investigated the economy-wide
effects of two external shocks, namely a permanent increase
in the world prices of agricultural commodities and climate
change, along with the impact of the domestic reallocation
of water between agricultural and non-agricultural uses. It
was also recognized that because of spatial heterogeneity of
the climate, the simulated scenarios have differential
impact on the agricultural production and hence on the
allocation of factors of production including water. The
greatest effects on major macroeconomic indicators occur in
the climate change simulations. As a result of the transfer
of water from rural to urban areas, overall production of
all crops declines. Although production on rainfed land
increases, production on irrigated land declines, most
notably the production of maize and fruits. The decrease in
agricultural production, coupled with the domestic price
increase, is further reflected in net trade. Agricultural
imports increase with a greater decline in agricultural exports. Show Less -